Model Acts, Confidentiality, Cooperation, Key NAIC Concerns

March 7, 2006

Developing model acts to cover a wide variety of insurance issues, confidentiality disclosures and cooperation between states were key concerns discussed by state insurance commissioners and their representatives as the National Association of Insurance Commissioners Spring Conference in Orlando. NAIC wrapped up its meetings March 7 with six task force and committee meetings held in the morning.

The Class Action Insurance Litigation Working Group, chaired by Colorado’s Erin Toll, discussed confidentiality concerns and if the group should develop a model act.

The working group discussed class action litigation issues and requested opinions from the audience, which included Ray Baker, Property Casualty Insurers Association of America spokesman; Neal Alldredge, National Association of Mutual Insurance Companies regulatory staff member; and Dave Snyder, American Insurance Association vice president and assistant to the general counsel; and several insurance company representatives.

Baker pointed out that with a multitude of state agencies and insurance departments, it is essential to establish a statutory doctrine and that such a document should clarify NCOIL’s position on such litigation.

Snyder urged the working group to pay attention to “real issues” and not to just become involved in class action fights.

“This group has to focus on existing models, don’t err in trying to go too far or recreate the system,” Snyder said. “In order to be successful this has to be a well-focused area.”

Everyone agreed that, although the need for a Class Action Model Act might not be a major concern today, it could soon become one, and therefore recommended that the task force proceed with a model. The suggestion will be presented to the NCOIL Executive Committee.

Rand Study discussed

The working group discussed an about-to-be-released Rand Study that will discuss case scenarios for class action cases. At issue, major concern was voiced about when a class action suit interferes with the state regulatory process.

The panel concluded that at present if a class action suit is filed, its deposition depended on the jurisdiction. In most cases, such cases would be sent to the state executive side of government and referred directly to the insurance department. In some cases, however, if a class-action suit is filed in a local court, judges feel they have to rule on its merits.

Questions were raised about what jurisdiction a particular case enters. Experts, including several members of the audience gave their opinions, concluding that it often depends on the wording in the case and whether or not the state department of insurance is named in the suit. If not, the case would probably have federal jurisdiction, but if the department of insurance is mentioned, then a state judge would decide. Several people pointed out that judges are often reluctant to share their jurisdictions.

The group attributed the fact that carriers are hesitant to contribute information to NAMIC due to concerns about confidentiality. It felt that standard confidentiality guidelines would help solve this problem.

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